The newly discovered methylation of free fatty acids by S-adenosylmethionine was characterized in human red blood cells. The reaction occurs in whole cells on the cytoplasmic side of the plasma membrane. Biosynthesis of fatty acid methyl esters is one of the consequences of phospholipase A2 activation in plasma membranes. The biosynthesis of another nonpolar methylated product was discovered upon incubation of lung membranes with oleoylcoenzyme A and S-adenosylmethionine. This product was identified as S-methyl-oleoylcysteamide and appears to be formed by cell membranes, including plasma membranes, after amidase clevage of oleoylcoenzyme A.